WAVEDANCER, INC. - Quarter Report: 2020 March (Form 10-Q)

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

 

 

 

Form 10-Q

(Mark One)

 

☑	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended

March 31, 2020

 

or

 

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from

to

 

Commission File Number:

000-22405

 

Information Analysis Incorporated

---

(Exact name of registrant as specified in its charter)

 

 

Virginia	54-1167364
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

                                                                            

11240 Waples Mill Road

Suite 201

Fairfax, Virginia 22030

---

(Address of principal executive offices, Zip Code)

(703) 383-3000

---

(Registrant’s telephone number, including area code)

 

 

---

(Former name, former address and former fiscal year, if changed since last report)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.                          Yes ☑     No ☐

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).      Yes ☑     No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer ☐	Accelerated filer ☐
Non-accelerated filer ☐	Smaller reporting company ☑
	Emerging growth company ☐

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐     No ☑

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:

11,211,760 shares of common stock, par value $0.01 per share, as of May 14, 2020.

 

 

Information Analysis Incorporated

Form 10-Q First Quarter 2020

 

 

 

		March 31, 2020				December 31, 2019
		(Unaudited)				(Note 1)
ASSETS
Current assets
Cash and cash equivalents		$	751,046			$	1,039,442
Accounts receivable			594,925				668,712
Prepaid expenses and other current assets			291,464				500,163
Total current assets			1,637,435				2,208,317
Right-of-use operating lease asset			125,698				149,762
Property and equipment, net of accumulated depreciation and amortization of $301,506 and $300,258			8,433				9,681
Other assets			6,281				6,281
Total assets		$	1,777,847			$	2,374,041
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable		$	24,348			$	216,227
Contract liabilities			270,791				464,223
Accrued payroll and related liabilities			215,084				219,350
Operating lease liability - current			106,197				103,955
Commissions payable			98,280				108,058
Other accrued liabilities			8,297				54,257
Total current liabilities			722,997				1,166,070
Operating lease liability - non-current			18,363				45,595
Total liabilities			741,360				1,211,665
Stockholders' equity
Common stock, $0.01 par value, 30,000,000 shares authorized, 12,854,376 shares issued, 11,211,760 shares outstanding as of March 31, 2020, and December 31, 2019			128,543				128,543
Additional paid-in capital			14,683,387				14,682,937
Accumulated deficit			(12,845,232	)			(12,718,893	)
Treasury stock, 1,642,616 shares at cost at March 31, 2020, and December 31, 2019			(930,211	)			(930,211	)
Total stockholders' equity			1,036,487				1,162,376
Total liabilities and stockholders' equity		$	1,777,847			$	2,374,041

 

		For the three months ended March 31,
		2020				2019
Revenues
Professional fees		$	844,403			$	762,118
Software sales			1,217,353				416,705
Total revenues			2,061,756				1,178,823
Cost of revenues
Cost of professional fees			579,631				446,868
Cost of software sales			1,203,298				409,116
Total cost of revenues			1,782,929				855,984
Gross profit			278,827				322,839
Selling, general and administrative expenses			340,813				485,452
Commissions expense			65,621				30,946
Loss from operations			(127,607	)			(193,559	)
Other income			1,268				2,706
Loss before provision for income taxes			(126,339	)			(190,853	)
Provision for income taxes			-				-
Net loss		$	(126,339	)		$	(190,853	)
Comprehensive loss		$	(126,339	)		$	(190,853	)
Net loss per commion share - basic		$	(0.01	)		$	(0.02	)
Net loss per commion share - diluted		$	(0.01	)		$	(0.02	)
Weighted average common shares outstanding
Basic			11,211,760				11,201,760
Diluted			11,211,760				11,201,760

 

		For the three months ended March 31,
		2020				2019
Cash flows from operating activities:
Net loss		$	(126,339	)		$	(190,853	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization			1,248				1,366
Stock option compensation			450				4,454
Changes in operating assets and liabilities:
Accounts receivable and contract assets			73,787				(105,655	)
Prepaid expenses and other current assets			208,699				180,851
Accounts payable			(191,879	)			234,757
Contract liabilities			(193,432	)			(137,828	)
Accrued payroll and related liabilities and other accrued liabilities			(51,152	)			(15,239	)
Commissions payable			(9,778	)			(132,609	)
Net cash used in operating activities			(288,396	)			(160,756	)
Net decrease in cash and cash equivalents			(288,396	)			(160,756	)
Cash and cash equivalents, beginning of the period			1,039,442				1,963,956
Cash and cash equivalents, end of the period		$	751,046			$	1,803,200
Supplemental cash flow Information
Interest paid		$	-			$	-
Income taxes paid		$	-			$	-

 

		For the three months ended March 31, 2020:
						Additional
		Common				Paid-In				Accumulated				Treasury
		stock				Capital				Deficit				Stock				Total
Balances at December 31, 2019		$	128,543			$	14,682,937			$	(12,718,893	)		$	(930,211	)		$	1,162,376
Net loss											(126,339	)							(126,339	)
Stock option compensation							450												450
Balances at March 31, 2020		$	128,543			$	14,683,387			$	(12,845,232	)		$	(930,211	)		$	1,036,487

		For the three months ended March 31, 2019:
						Additional
		Common				Paid-In				Accumulated				Treasury
		stock				Capital				Deficit				Stock				Total
Balances at December 31, 2018		$	128,443			$	14,676,006			$	(12,001,647	)		$	(930,211	)		$	1,872,591
Net loss											(190,853	)							(190,853	)
Stock option compensation							4,454												4,454
Balances at March 31, 2019		$	128,443			$	14,680,460			$	(12,192,500	)		$	(930,211	)		$	1,686,192

 

1.	Summary of Significant Accounting Policies

 

Organization and Business

 

Founded in 1979, Information Analysis Incorporated, which we refer to as the “Company”, “we”, or “IAI”, is in the business of modernizing client information systems, performing professional information technology (IT) services, and developing and maintaining IT systems for government and commercial organizations. IAI’s core competencies lie in legacy system (COBOL) migration and modernization, including developing user-friendly interfaces for complex legacy environments, database conversion and migration, development of electronic fillable forms (e-Forms), including smart forms, Section 508 compliant forms, and web-based and mobile device forms solutions, full life cycle Oracle development, and custom software development. The Company also engages in sales of third-party software for electronic forms development and management, legacy systems modernization, and robotics process automation. IAI’s ultimate customers include federal and state government agencies as well as private sector organizations throughout the United States, with a concentration in the Washington, D.C. metropolitan area.

 

Unaudited Interim Financial Statements

 

The accompanying unaudited financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions for Form 10-Q and Article 8-03 of Regulation S-X. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). In the opinion of management, the unaudited financial statements include all adjustments necessary (which are of a normal and recurring nature) for the fair and not misleading presentation of the results of the interim periods presented. These unaudited financial statements should be read in conjunction with the Company’s audited financial statements for the year ended December 31, 2019 included in the Annual Report on Form 10-K filed by the Company with the SEC on March 30, 2020 (the “Annual Report”), as amended. The accompanying December 31, 2019, balance sheet was derived from the audited financial statements included in the Annual Report. The results of operations for any interim periods are not necessarily indicative of the results of operations for any other interim period or for a full fiscal year.

 

There have been no changes in the Company’s significant accounting policies as of March 31, 2020, as compared to the significant accounting policies disclosed in Note 1, "Summary of Significant Accounting Policies" in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2019, that was filed with the SEC on March 30, 2020.

 

Use of Estimates and Assumptions

 

The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect certain reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results can, and in many cases will, differ from those estimates. 

 

Income Taxes

 

The Company has analyzed its income tax positions using the criteria required by U.S. GAAP and concluded that as of March 31, 2020, and December 31, 2019, it has no material uncertain tax positions and no interest or penalties have been accrued. Through the anticipated filing of its 2019 federal income tax return, the Company has net operating loss carryforwards of approximately $3.5 million, of which $0.8 million will expire, if unused, on December 31, 2020.

 

Recent Accounting Pronouncements Not Yet Adopted

 

In December 2019, the Financial Accounting Standards Board issued ASU 2019-12, “Income Taxes (Topic 740), Simplifying the Accounting for Income Taxes,” that removes certain exceptions to the general principles in Topic 740 and simplifies the application of areas of Topic 740 by clarifying and amending existing guidance. The amendments in this Update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. The adoption of ASU 2019-12 is not expected to have a material effect on the Company’s financial statements or cash flows.

 

 

Information Analysis Incorporated

Form 10-Q First Quarter 2020

 

 

2.	Revenue from Contracts with Customers

 

Revenue is recognized when all of the following steps have been taken and criteria met for each contract:

 

•

Identification of the contract, or contracts, with a customer - A contract with a customer exists when (i) the Company enters into an enforceable contract with a customer that defines each party’s rights regarding the goods or services to be transferred and identifies the payment terms related to these goods or services, (ii) the contract has commercial substance and the parties are committed to perform and, (iii) it determines that collection of substantially all consideration to which the Company will be entitled in exchange for goods or services that will be transferred is probable based on the customer’s intent and ability to pay the promised consideration.

 

•

Identification of the performance obligations in the contract - Performance obligations promised in a contract are identified based on the goods or services that will be transferred to the customer that are both capable of being distinct, whereby the customer can benefit from the goods or service either on its own or together with other resources that are readily available from third parties or from the Company, and are distinct in the context of the contract, whereby the transfer of the goods or services is separately identifiable from other promises in the contract. To the extent a contract includes multiple promised goods or services, the Company applies judgment to determine whether promised goods or services are capable of being distinct and distinct in the context of the contract. If these criteria are not met, the promised goods or services are accounted for as a combined performance obligation.

 

•

Determination of the transaction price - The transaction price is determined based on the consideration to which the Company will be entitled in exchange for transferring goods or services to the customer adjusted for estimated variable consideration, if any. The Company typically estimates the transaction price impact of discounts offered to the customers for early payments on receivables or rebates based on sales target achievements. Constraints are applied when estimating variable considerations based on historical experience where applicable.

 

•

Allocation of the transaction price to the performance obligations in the contract - If the contract contains a single performance obligation, the entire transaction price is allocated to the single performance obligation. Contracts that contain multiple performance obligations require an allocation of the transaction price to each performance obligation based on a relative standalone selling price basis. The Company determines standalone selling price by taking into account available information such as historical selling prices of the performance obligation, geographic location, overall strategic pricing objective, market conditions and internally approved pricing guidelines related to the performance obligations.

 

•

Recognition of revenue when, or as, the Company satisfies performance obligations - The Company satisfies performance obligations either over time or at a point in time as discussed in further detail below. Revenue is recognized at or over the time the related performance obligation is satisfied by transferring a promised good or service to a customer.

 

Nature of Products and Services

 

The Company generates revenue from the sales of information technology professional services, sales of third-party software licenses and implementation and training services, sales of third-party support and maintenance contracts based on those software products, and incentive payments received from third-party software suppliers for facilitating sales directly between that supplier and a customer introduced by the Company. The Company sells through its direct relationships with end customers and under subcontractor arrangements.

 

 

Information Analysis Incorporated

Form 10-Q First Quarter 2020

 

Professional services are offered through several arrangements – through time and materials arrangements, fixed-price-per-unit arrangements, fixed-price arrangements, or combinations of these arrangements within individual contracts. Revenue under time and materials arrangements is recognized over time in the period the hours are worked or the expenses are incurred, as control of the benefits of the work is deemed to have passed to the customer as the work is performed. Revenue under fixed-price-per-unit arrangements is recognized at a point in time when delivery of units have occurred and units are accepted by the customer or are reasonably expected to be accepted. Generally, revenue under fixed-price arrangements and mixed arrangements is recognized either over time or at a point in time based on the allocation of transaction pricing to each identified performance obligation as control of each is transferred to the customer. For fixed-price arrangements for which the Company is paid a fixed fee to make itself available to support a customer, with no predetermined deliverables to which transaction prices can be estimated or allocated, revenue is recognized ratably over time.

 

Third-party software licenses are classified as enterprise server-based software licenses or desktop software licenses, and desktop licenses are further classified by the type of customer and whether the licenses are bulk licenses or individual licenses. The Company’s obligations as the seller for each class differ based on its reseller agreements and whether its customers are government or non-government customers. Revenue from enterprise server-based sales to either government or non-government customers is usually recognized in full at a point in time based on when the customer gains use of the full benefit of the licenses, after the licenses are implemented. If the transaction prices of the performance obligations related to implementation and customer support for the individual contract is material, these obligations are recognized separately over time, as performed. Revenue for desktop software licenses for government customers is usually recognized on a gross basis at a point in time, based on when the customer’s administrative contact gains training in and beneficial use of the administrative portal. If the transaction prices of the performance obligations related to implementing the government administrator’s use of the administrative portal and administrator support for the individual contract are material (rare), these obligations are recognized separately over time, as performed. Revenue for bulk desktop software licenses for non-government customers is usually recognized on a gross basis at a point in time, based on when the customer’s administrative contact gains training in and beneficial use of the administrative portal. For desktop software licenses sold on an individual license basis to non-government customers, where the Company has no obligation to the customer after the third-party makes delivery of the licenses, the Company has determined it is acting as an agent, and the Company recognizes revenue upon delivery of the licenses only for the net of the selling price and its contract costs.

 

Third-party support and maintenance contracts for enterprise server-based software include a performance obligation under the Company’s reseller agreements for it to be the first line of support (direct support) and second line of support (intermediary between customer and manufacturer) to the customer. Because of the support performance obligations, and because the amount of support is not estimable, the Company recognizes revenue ratably over time as it makes itself available to provide the support.

 

Incentive payments are received under reseller agreements with software manufacturers and suppliers where the Company introduces and court a customer, but the sale occurs directly between the customer and the supplier or between the customer and the manufacturer. Since the transfer of control of the licenses cannot be measured from outside of these transactions, revenue is recognized when payment from the manufacturer or supplier is received.

 

Disaggregation of Revenue from Contracts with Customers

 

 

 

Information Analysis Incorporated

Form 10-Q First Quarter 2020

  

Contract Balances

 

Accounts Receivable

 

Trade accounts receivable are recorded at the billable amount where the Company has the unconditional right to bill, net of allowances for doubtful accounts. The allowance for doubtful accounts is based on the Company’s assessment of the collectability of accounts. Management regularly reviews the adequacy of the allowance for doubtful accounts by considering the age of each outstanding invoice, each customer's expected ability to pay and collection history, when applicable, to determine whether a specific allowance is appropriate. Accounts receivable deemed uncollectible are charged against the allowance for doubtful accounts when identified. There were no such allowances recognized at March 31, 2020, and December 31, 2019.

 

Contract Assets 

 

Contract assets consist of assets typically resulting when revenue recognized exceeds the amount billed or billable to the customer due to allocation of transaction price. There were no contract assets balances at March 31, 2020, and December 31, 2019.

 

Contract Liabilities

 

Contract liabilities consist of amounts that have been invoiced and for which the Company has the right to bill, but that have not been recognized as revenue because the related goods or services have not been transferred. Contract liabilities balances were $270,791 and $464,223 at March 31, 2020, and December 31, 2019, respectively. $212,568 of revenue was recognized in the three months ended March 31, 2020, that was included in the contract liability balance at the beginning of the period.

 

Costs to Obtain or Fulfill a Contract

 

When applicable, the Company recognizes an asset related to the costs incurred to obtain a contract only if it expects to recover those costs and it would not have incurred those costs if the contract had not been obtained. The Company recognizes an asset from the costs incurred to fulfill a contract if the costs (i) are specifically identifiable to a contract, (ii) enhance resources that will be used in satisfying performance obligations in future and (iii) are expected to be recovered. There were no such assets at March 31, 2020, and December 31, 2019. When incurred, these costs are amortized ratably over the periods of the contracts to which those costs apply.

 

Financing Components

 

In instances where the timing of revenue recognition differs from the timing of invoicing, the Company has determined its contracts do not include a significant financing component. The primary purpose of the Company’s invoicing terms is to provide customers with simplified and predictable ways of purchasing its products and services, not to receive financing from its customers or to provide customers with financing. Examples include invoicing at the beginning of a software support and maintenance term with revenue recognized ratably over the contract period.

 

Deferred Costs of Revenue

 

Deferred costs of revenue consist of the costs of third-party support and maintenance contracts for enterprise server-based software. These costs are reported under the prepaid expenses caption on the Company’s balance sheets. The Company recognizes these direct costs ratably over time as it makes itself available to provide its performance obligation for software support, commensurate with its recognition of revenue. Deferred costs of revenue balances included in prepaid expenses were $246,351 and $453,607 at March 31, 2020, and December 31, 2019, respectively.

 

 

Information Analysis Incorporated

Form 10-Q First Quarter 2020

  

 

3.

Leases

 

The Company has an operating lease which is a real estate lease for its headquarters in Fairfax, Virginia. This lease has a fixed lease term of 49 months. The Company determines if an arrangement is a lease at inception. Operating leases are included in right-of-use operating lease assets and operating lease liabilities in the Company’s balance sheet as of March 31, 2020, and December 31, 2019. As of March 31 2020, and December 31, 2019, the Company does not have any sales-type or direct financing leases.

 

The Company’s operating lease asset represents its right to use an underlying asset for the lease term and lease liabilities represent its obligation to make lease payments arising from the lease. Operating lease assets and liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. Since the lease does not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The operating lease asset also includes any lease payments made and excludes lease incentives. Lease expense for lease payments is recognized on a straight-line basis over the lease term. The Company’s lease agreement includes rental payments escalating annually for inflation at a fixed rate. These payments are included in the initial measurement of the operating lease liability and operating lease asset. The Company does not have any rental payments which are based on a change in an index or a rate that can be considered variable lease payments, which would be expensed as incurred.

 

The Company’s lease agreement does not contain any material residual value guarantees or material restrictions or covenants.

 

The Company does not sublease any real estate to third parties.

 

The following table provides supplemental balance sheet information related to the Company’s operating lease:

 

 

 

The following table reconciles the undiscounted cash flows to the operating lease liabilities recorded in the Company’s balance sheet at March 31, 2020.

 

 

As of March 31, 2020, the Company’s operating lease had a weighted average lease term of approximately 1.3 years. The discount rate of the lease is equal to IAI’s incremental borrowing rate at the measurement date of the lease agreement. The weighted average discount rate of the Company’s operating lease is approximately 5.5%. For the three months ended March 31, 2020, the Company incurred $26,122 of expense related to its operating leases. Rent expense for the three months ended March 31, 2019 was $26,122. For the three months ended March 31, 2020, there were no short term leases with a term less than 12 months.

 

 

Information Analysis Incorporated

Form 10-Q First Quarter 2020

  

 

4.	Stock-Based Compensation

 

The Company has two shareholder–approved stock-based compensation plans. The 2006 Stock Incentive Plan was adopted in 2006 (“2006 Plan”) and had options granted under it through April 12, 2016. On June 1, 2016, the shareholders ratified the IAI 2016 Stock Incentive Plan (“2016 Plan”), which had been approved by the Board of Directors on April 4, 2016.

 

The Company recognizes compensation costs only for those shares expected to vest on a straight-line basis over the requisite service period of the awards. Such options generally vest over periods of six months to two years. There were no options granted in the three months ended March 31, 2020 and 2019. Fair values of option awards granted would have been estimated using the Black-Sholes option pricing model.

 

2016 Stock Incentive Plan

 

The 2016 Plan became effective June 1, 2016, and expires April 4, 2026. The 2016 Plan provides for the granting of equity awards to key employees, including officers and directors. The maximum number of shares for which equity awards may be granted under the 2016 Plan is 1,000,000. Options under the 2016 Plan expire no later than ten years from the date of grant or when employment ceases, whichever comes first, and vest over periods determined by the Board of Directors. The minimum exercise price of each option is the quoted market price of the Company’s stock on the date of grant. At March 31, 2020, there were unexpired options for 371,000 shares issued under the 2016 Plan, of which 352,500 were exercisable.

 

2006 Stock Incentive Plan

 

The 2006 Plan became effective May 18, 2006, and expired April 12, 2016. The 2006 Plan provides for the granting of equity awards to key employees, including officers and directors. Options under the 2006 Plan were generally granted at-the-money or above, expire no later than ten years from the date of grant or within three months of when employment ceases, whichever comes first, and vest over periods determined by the Board of Directors. The number of shares subject to options available for issuance under the 2006 Plan could not exceed 1,950,000. There were 849,000 unexpired options remaining from the 2006 Plan at March 31, 2020, all of which were exercisable.

 

The status of the options issued under the foregoing option plans as of March 31, 2020, and changes during the three months ended March 31, 2020, were as follows:

 

 

 

There were no options granted during the three months ended March 31, 2020 and 2019. There were no options exercised during the three months ended March 31, 2020 and 2019. As of March 31, 2020, there was $332 of total unrecognized compensation cost related to non-vested share-based compensation arrangements granted under the stock incentive plans; that cost is expected to be recognized over a weighted-average period of two months.

 

Total compensation expense related to these plans was $450 and $4,454 for the three months ended March 31, 2020 and 2019, respectively, none of which related to options awarded to non-employees.

 

 

Information Analysis Incorporated

Form 10-Q First Quarter 2020

 

Nonvested option awards as of March 31, 2020 and changes during the three months ended March 31, 2020 were as follows:

 

 

 

 

5.	Revolving Line of Credit

 

The Company has a revolving line of credit with a bank providing for demand or short-term borrowings of up to $1,000,000. The line expires on May 31, 2020. As of March 31, 2020, no amounts were outstanding under this line of credit. The Company did not borrow against this line of credit in the last twelve months.

 

 

 

6.	Loss Per Share

 

Basic loss per share excludes dilution and is computed by dividing loss available to common shareholders by the weighted-average number of shares outstanding for the period. Diluted earnings (loss) per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock, except for periods when the Company reports a net loss because the inclusion of such items would be antidilutive. The antidilutive effect of 64,076 shares and 268,926 shares from stock options were excluded from diluted shares for the three months ended March 31, 2020 and 2019, respectively.

 

The following is a reconciliation of the amounts used in calculating basic and diluted net loss per common share:

 

  

 

Information Analysis Incorporated

Form 10-Q First Quarter 2020

  

 

7.	Subsequent Events

 

The COVID-19 (coronavirus) outbreak has had a notable impact on general economic conditions, including, but not limited to, the temporary closures of many businesses, “shelter in place” and other governmental regulations, and “work from home” directives. There are many unknowns, and many regional inconsistencies. Notable potential effects on the Company include U.S. government procurements may be delayed or cancelled, work on new or existing contracts that require personal interactions may be suspended, payment processing for customer invoices may be delayed, employees and customers or their families may become infected, and personal business development meetings may not be able to take place. The Company continues to monitor the impact of the COVID-19 outbreak closely. The extent to which the COVID-19 outbreak will impact the Company’s business, results of operations, financial condition, and cash flows is uncertain.

 

Due to the coronavirus uncertainty, and pending staffing and payroll cuts due to liquidity constraints, the Company applied for a Paycheck Protection Program loan, guaranteed by the U.S. Small Business Administration (“SBA”). The Company was funded by its lender on April 20, 2020, in the amount of $450,000. The loan accrues interest at a fixed rate of 1% and has a term of two years. The first payment is deferred for six months, though interest will accrue during the deferral period. The loan will be used exclusively to support maintaining employee payroll and benefits. After eight weeks from the date funded, IAI may apply to the SBA through its lender for forgiveness of all or a portion of the loan. The amount of forgiveness for which IAI may apply and for which it may be approved is uncertain.

 

 

Information Analysis Incorporated

Form 10-Q First Quarter 2020